My name is Sander Ressler and I have over 30 years of experience handling compliance and supervision issues. At “Nightmare on Compliance Street” we address questions submitted anonymously from our readers that are escalating their anxiety levels.
The reason we call this segment “Nightmare on Compliance Street” is that many of the issues handled by Compliance Departments are indeed a nightmare!
Frequently, these are situations without an obvious solution. The decisions that are made can on these issues directly affect people personally and professionally – And often have serious consequences.
I hope this series will give you some guidance if you come across a similar situation in the future.
Q: I am the CCO of a medium-size broker-dealer with approximately 500 RRs and I am a member of the due diligence committee. We have an investment banking department that primarily looks at alternative investments. The CEO of our firm bought a private placement to the committee for review. The private placement looks shaky with a lot of red flags. The catch is the General Partner of the private placement is the brother of the CEO. Can I be fired by the CEO for not approving the product? What should I do?
A: Avoid the conflict and treat this private placement the same as any other presented to the committee:
- If the due diligence doesn’t uncover any significant red flags, then memorialize the approval with disclosure of the conflict. Remember, red flags should be resolved to the satisfaction of the committee.
- If there are significant red flags that can not be resolved, voice your opinion, and make sure the meeting notes are accurate.
- Usually, compliance is an advisory role, we do not have veto power. However, to do your job well – do not shrink from voicing concerns. Make your opinions known and clear.
Q: I am the CCO of a large broker-dealer and I have a staff of branch examiners of whom some are female. I am uncomfortable sending a woman alone to a home office branch where the RR works. I don’t want to have gender-based policies but I also want to make sure my employees are protected and not put in harm’s way. In my opinion, men are generally not harassed in this situation, but I can easily see how a woman could be. What should I do?
A: This is a great example of when to be collaborative in making decisions:
- The easy answer, and my initial thought was, of course, we do not want to put an employee in a position to be harassed so we adjust her assignments accordingly.
- However, some attorneys and human resources experts have told me this type of adjustment could be considered discrimination and could be a legal issue.
- Don’t set yourself up as the sole decision-maker on issues related to fears of harassment risks. Whenever you are considering a policy or procedure change for a select group of your employees, utilize your legal and HR resources. You don’t know what you don’t know – Collaborate!